Huw Jones

LONDON, (Reuters) – Britain’s Financial Services Minister said Tuesday that it would be difficult for the European Union to replace London in clearing trillions in euro derivatives. He also stated that there was no significant shift in activity at the moment.

Brussels stated that it wanted to increase euro clearing capability within the EU after Britain left. This would eliminate heavy dependence on LCH, the London Stock Exchange unit which cleared most of the euro interest rate swaps.

Brussels will allow EU banks to clear in London until June 2025. In the interim, it will offer incentives to banks to move more business to Frankfurt and possible penalties for those that don’t.

John Glen, UK Financial Services Minister to European Affairs Committee stated that “it’s very difficult to build that infrastructure. But that is a matter that they are able to do.”

Glen stated that although some clearing has occurred in London, it was not sufficient to be of concern for Britain.

“I don’t think it’s part a trend,” said he.

While Brexit was detrimental to Britain’s financial industry, Glen claimed that it has grown and is more resilient than initially expected. Glen also said that around 7,000 people are leaving London for Europe, which Glen believes will help prevent haemorrhage.

The EU does not grant access to any other financial activity from Britain except clearing.

Glen stated, “I’m not waiting for that decision”, and added that his main focus was to keep London competitive and well-regulated for clearing.

Glen said that the EU and Britain will create their own regulations in parallel. This is especially true for new areas like fintech and green finance.

Glen stated that non-EU banks were concerned about EU proposals, which could make it more difficult for them to open a branch to provide wholesale market services to clients within the bloc.

We will expect the EU to make clear their intentions. “They seem to be moving forward in a positive way and that is something I appreciate,” Glen stated.